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Capital expenditure of $6.6 million represents capitalised advanced stripping costs of $2.7

million; expenditure on underground equipment of $1.3 million; the new SAG mill of $1.0

million and miscellaneous equipment and tools of $1.6 million.

Capitalised exploration and evaluation expenditure of $0.1 million was incurred in the six

months ended 30 June 2016. This was mainly exploration in the Ordubad contract area.

The Group reports in US dollars and a substantial proportion of its business is conducted in

either US dollars or the Azerbaijan Manat ("AZN") which has been stable at AZN 1 equaling

approximately $0.95 during the six months ended 30 June 2016. In addition, the Company's

revenues and the majority of its interest bearing debt are denominated in US dollars. The

Company believes it does not have any significant exposure to foreign exchange fluctuations

although the situation is kept under review.

Corporate and social responsibility

Our health, safety, social and environmental performance forms a central part of our

philosophy of continuous commitment to best practice. Given the hazardous nature of mining

and the climatic conditions at Gedabek, especially in winter, it is inevitable that minor accidents

and mishaps occur, in spite of our best efforts to avoid them. In the H1 2016 period under

review, we recorded four lost time injury (LTI) incidents, none of which resulted in serious

injury to the casualties.

Protection of the environment in and around our properties is of vital importance to us. In this

regard, the seven kilometre pipeline that carries the tailings slurry from our agitation leaching

plant to the tailings dam where the tailings are stored is of particular concern, because the

internal pressures make the pipeline prone to leakages. In order to minimise risks to the

environment, we have enclosed the pipeline in a lined ditch along its entire length and the

pipeline is regularly patrolled on a twenty four seven basis, so that any leaks can be quickly

spotted and dealt with. In spite of these precautions, we had two leakage incidents in March,

during a particularly cold spell, when tailings escaped from the enclosing ditch and

contaminated the surrounding area and local watercourses. However, rapid remediation

measures were undertaken and in both cases environmental equilibrium was restored within a

short period.

Our efforts to improve our health safety and environmental performance will be sustained with

the aim of achieving and maintaining the highest international standards.


I am delighted that your Company has returned to profitability and look forward to the rest of